California may be one of the largest cannabis markets in the world, but opportunities abound in the Northeast, especially now that New Jersey and New York have legalized adult-use, according to Jay Czarkowski, founding partner and licensing expert at cannabis business consulting firm Canna Advisors.
The Canna Advisors team, which recently opened an office in the Empire State Building, expects New York to issue draft regulations on adult-use cannabis business licensing by the end of March.
“I’ve heard over a period of time, from multiple sources, that there may be somewhere around 750 business licenses that the state’s going to issue, which is a good number,” Czarkowski says. “It’s not a lot by any means. I think there could certainly be many more, but it’s a fair number of licenses.”
In any case, a limit on the number of licenses issued means it will be a competitive licensing process in the Empire State, and Czarkowski says there are ways for entrepreneurs to increase their chances of securing a license, even before the regulations are finalized.
Here is what he says potential applicants should be doing right now to get ahead of the competition.
1. Secure commercial real estate.
Whether it’s a grow operation, a processing facility or a dispensary, a cannabis business cannot begin operations without a physical location.
“And that real estate can’t be your garage or your basement in the house that you rent,” Czarkowski says. “It needs to be a commercial property, and you also need local support.”
Czarkowski recommends identifying real estate in a cannabis-friendly city, town or county that will not only grant the business local approval to operate, but will also work with cannabis business owners on building permits and zoning issues.
2. Find a supportive municipality and start building community relationships.
Czarkowski says the importance of locating in a supportive community—and building relationships within that community—cannot be overstated.
“You need to go down to city hall, talk to your local officials, find out what their concerns are [and] find out if the town is going to allow these businesses,” he says. “It’s a great step that anybody could be taking right now.”
Roughly 30% of New York’s municipalities opted out of hosting adult-use dispensaries ahead of a Dec. 31, 2021, deadline to do so, with most of those municipalities being smaller towns and villages in the state. Czarkowski finds this encouraging.
“I don’t see it slowing down the industry one bit out there,” he says, adding that many of the municipalities that initially opted out of cannabis sales may rethink this decision later.
“The reality is that people in those towns will just go to the next town over [to buy cannabis], and then these municipalities will miss out on tax revenue,” Czarkowski says. “Over time, a lot of these municipalities that have it banned [will] come around and at some point, they will allow the businesses.”
3. Watch the regulations unfold.
While the rules governing adult-use cannabis business licensing have yet to be drafted, Gov. Kathy Hochul recently signed legislation to allow hemp businesses to apply for a new Conditional Adult-Use Cannabis Cultivator license to grow adult-use cannabis during the 2022 growing season.
“I think it’s great that the state is looking to issue these provisional licenses sooner rather than later to the hemp cultivators,” Czarkowski says. “I’m sure those hemp cultivators are already thinking about, what do I need to do to not only cultivate some product, but to get product on shelves?”
When draft rules for New York’s adult-use cannabis program materialize, Czarkowski says they will likely address testing, pesticide and fungicide use, contaminants, packaging, and distribution. Hemp growers looking to secure conditional cultivation licenses, as well as those waiting to apply for more traditional adult-use business licenses, should be considering these issues and thinking about not only what they need in place to grow cannabis, but also best practices to ensure the product passes testing and reaches dispensary shelves.
Czarkowski says New York’s aspiring cannabis operators should also pay close attention to the state’s rules on social equity.
“The social equity program that the state is working on right now is fascinating to me in a number of ways,” he says. “Maybe they’ve learned from other states that you can attempt to issue the licenses to social equity-qualified applicants all day long, but these groups need capital in order to execute and get a business up and running.”
Last month, Hochul announced during her State of the State address that New York will create a $200 million fund to support social equity cannabis businesses. Hochul’s office has proposed a funding mechanism based, in part, on cannabis licensing fees and taxes.
“Supposedly, $50 million of that is going to come from soon-to-be application fees and tax revenue,” Czarkowski says. “And supposedly, an additional $150 million is going to be coming from private investors. The devil is in the details, so we have to see how this shakes out. Who are these private investors? Are they going to give the state money? I’m not sure what that’s going to look like. … But New York seems to be taking very seriously the need to have capital available for these groups, so I think that alone will differentiate New York’s social equity program from all those before.”
4. Build a team—and a business plan.
Czarkowski says one way to get ahead in a competitive licensing process is to build a solid team with the ability to execute once a license is in hand.
“If someone in New York wants to go for a cultivation license, they better have someone on their team that knows how to grow healthy plants,” he says. The same is true for those seeking processing, manufacturing and retail licenses, he adds; an expert in these fields should be hired before the application process to ensure the best chances of success.
“We’re also working with folks to develop a financial model,” Czarkowski says. “These are tools that they can then take to their friends and family or investors to start putting together their war chest to build a business."